What does (M) mean in the GDP formula?
Answer and explanation
Correct answer: Imports
In the expenditure method, GDP is calculated as GDP = C + I + G + (X − M). Here, M represents imports, while X represents exports. Imports are subtracted because they are goods and services produced outside the domestic economy. Although residents may spend money on imports, that spending must not be counted as domestic production. Thus, X − M represents net exports.
Frequently asked questions
What is the correct answer to this question?
Imports
Why is this the correct answer?
In the expenditure method, GDP is calculated as GDP = C + I + G + (X − M). Here, M represents imports, while X represents exports. Imports are subtracted because they are goods and services produced outside the domestic economy. Although residents may spend money on imports, that spending must not be counted as domestic production. Thus, X − M represents net exports.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
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